topic Re: I want to pay off billed credit card charges in full each month to improve my credit score. in Credit Cards

I want to pay off billed credit card charges in full each month to improve my credit score.

Anonymous — Fri, 13 Dec 2013 16:31:03 GMT

I have a $500 credit line and don't want to revolve and incur interest charges. I've been told that my score will improve if I pay the balance in full each month a few days before the actual due date but that I must spend near the maximum line without going over it. If this is true, (1) How many days is optimal to pay the balance in full before the due date is optimal? (2) How much of the credit line must I spend each month to get the optimal impact? How many months will be needed to start seeing a positive impact on my FICO score? (4) Would a higher credit line (like $1,000) have a greater impact?

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

Creditaddict — Fri, 13 Dec 2013 16:37:47 GMT

Is this your only credit card?

I wouldn't complicate things with all the payment games unless this is your only credit card and or you are rebuilding and going to be applying for things in the near future... if this is the case what people usually say is:

Say you have $500 limit and the statement is the 1st (it reports to your credit on the 1st also)

your actual payment due date is the 15th (all numbers just for easy understanding I hope not actual of yours)

you charge say $400 that month

you would want to make a payment for $355 BEFORE the 1st so that when your statement is cut and reported to the credit report you show just a $40ish balance = under 9% utilization of your total credit line.

you would then follow up and pay the remaining $40ish before the 15th (your payment due date) to $0 the balance and not pay any interest.

rinse and repeat...

now like I said optimal utilization is only important when you are going to be applying for more credit... if you are not and just using this card or had a really high limit, paying multiple times a month is time consuming and pointless since your utilization won't matter when not applying, you just want to pay in full before due date so no interest.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

Anonymous — Fri, 13 Dec 2013 17:14:15 GMT

I am a bit confused about the term "utilization." In the example you provided, wouldn't the $400 spent be utilization? Or is the revolved portion considered utilization? My goal is to improve my credit score without revolving. When my score is better, I can then seek to obtain more credit. Thanks for your insights and help.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

Creditaddict — Fri, 13 Dec 2013 17:17:21 GMT

@Anonymous wrote:
I am a bit confused about the term "utilization." In the example you provided, wouldn't the $400 spent be utilization? Or is the revolved portion considered utilization? My goal is to improve my credit score without revolving. When my score is better, I can then seek to obtain more credit. Thanks for your insights and help.

your score will be calculated on the reported use of credit so if you pay down the balance to only $40 before it reports that will be your util. which gives you that magic number of under 9%.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

Anonymous — Fri, 13 Dec 2013 17:22:20 GMT

It's useful to distinguish between (1) your normal spending habits, and (2) how others see you.

If you have a $500 card, and spend $475 on it each month, and pay by the due date, then you're not incurring interest, or getting yourself into trouble. Your CC issuer may be used to this pattern, and probably doesn't care.

However, someone who doesn't know you will evaluate you based on what's in your report. If your report shows a $475 balance against a $500 limit, then you appear to be maxed out, and living close to the edge.

The remedy is to control what shows up on the report, by paying the bulk of the balance before your CC company reports that balance.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

Creditaddict — Fri, 13 Dec 2013 17:23:57 GMT

@Anonymous wrote:
It's useful to distinguish between (1) your normal spending habits, and (2) how others see you.

If you have a $500 card, and spend $475 on it each month, and pay by the due date, then you're not incurring interest, or getting yourself into trouble. Your CC issuer may be used to this pattern, and probably doesn't care.

However, someone who doesn't know you will evaluate you based on what's in your report. If your report shows a $475 balance against a $500 limit, then you appear to be maxed out, and living close to the edge.

The remedy is to control what shows up on the report, by paying the bulk of the balance before your CC company reports that balance.

ah better way of saying it! thank you

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

MMB85 — Fri, 13 Dec 2013 17:24:23 GMT

I think you are looking way too much into it and also falling for myths and hearsay. There is no magic formula. Use your card and pay it off in full. I pay my card off in full every few days. Not a must, but I just feel comfortable doing that and not having a balance sit on my card for that long.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

Anonymous — Fri, 13 Dec 2013 17:51:45 GMT

@Anonymous wrote:
I have a $500 credit line and don't want to revolve and incur interest charges. I've been told that my score will improve if I pay the balance in full each month a few days before the actual due date but that I must spend near the maximum line without going over it. If this is true, (1) How many days is optimal to pay the balance in full before the due date is optimal? (2) How much of the credit line must I spend each month to get the optimal impact? How many months will be needed to start seeing a positive impact on my FICO score? (4) Would a higher credit line (like $1,000) have a greater impact?

A couple of additional points here.

1. Your reported utilization of credit makes up around 30% of a FICO score. There are a variety of threads and articles here and elsewhere that explain this. Another way of saying it is that maxing out credit is a strong predictor of future delinquency.

2. In general, using a CC more heavily will weigh in your favor for getting a higher credit line in the future. Obviously, this only works to your advantange if you are responsible in your use of what you have.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

MMB85 — Fri, 13 Dec 2013 18:01:31 GMT

I use my Freedom very heavily, and pay it off ever few days, sometimes a tid bit longer depending if I haven't got around to or waiting for something to post. But most of the time it is twice a week. That doesn't mean I am not careless with it and also buy things that I don't need. I just mean that I use it for every day transactions, like a debit card. I never really use my debit card anymore. Using it heavily and paying it off regularly is different than maxing out or getting near. You shouldn't be doing that. Credit card companies look at your daily TRANSACTIONS. There is no benefit to having a balance sit on your account. There are certain situations where it may not hurt you, like having a very low Utilization, but there is no benefit to having it sit there. Credit card companies and also credit bureaus look at your use, Utilization% and your pay off history.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

Anonymous — Fri, 13 Dec 2013 18:01:50 GMT

Many thanks for your reply. I understand "utilization" better and the need to control what is reported. A higher credit line of say $1,000 on which $400 is spent on a regular basis but paid off in full each month before the due date would have a utilization of 40% and not so much of a "living on the edge" image. It would also demonstrate the capacity to meet a $400 payment obligation on an ongoing basis. Making two payments of $200 each would bring utilization down to 20%. What is considered optimal utilization?

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

MMB85 — Fri, 13 Dec 2013 18:07:00 GMT

see my post above.

optimal is having a 0% utilization. At the highest, it should be below 10%.

Why have that $400 just sit there? Just pay it off. Not at the end of the month, but rather pay off your balances every few days or so, so that they don't build up and your util% stays near 0%. That shows better than having a balance sit on your account for a month and then pay off in full right before the end of the cycle.

40% and even 20% utilization is really bad. Shouldn't be getting close to that. Especially purposely thinking that it benefits you somehow.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

Anonymous — Fri, 13 Dec 2013 18:09:13 GMT

@Anonymous wrote:
Many thanks for your reply. I understand "utilization" better and the need to control what is reported. A higher credit line of say $1,000 on which $400 is spent on a regular basis but paid off in full each month before the due date would have a utilization of 40% and not so much of a "living on the edge" image. It would also demonstrate the capacity to meet a $400 payment obligation on an ongoing basis. Making two payments of $200 each would bring utilization down to 20%. What is considered optimal utilization?

Optimal utilization is slightly above 0%.

One reason for this is that it's important to show "signs of life".

But it's better to have 0% utilization than a high figure like 75%.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

MMB85 — Fri, 13 Dec 2013 18:13:34 GMT

@Anonymous wrote:
@Anonymous wrote:
Many thanks for your reply. I understand "utilization" better and the need to control what is reported. A higher credit line of say $1,000 on which $400 is spent on a regular basis but paid off in full each month before the due date would have a utilization of 40% and not so much of a "living on the edge" image. It would also demonstrate the capacity to meet a $400 payment obligation on an ongoing basis. Making two payments of $200 each would bring utilization down to 20%. What is considered optimal utilization?
Optimal utilization is slightly above 0%.

One reason for this is that it's important to show "signs of life".

But it's better to have 0% utilization than a high figure like 75%.

The "signs of life" are seen through your daily transactions, not your utilization %. Having a really low util% won't hurt you, but t won't benefit you as compared to a 0%.

Showing heavy and regular use of a card, which also regularly shows a 0% utilization is the most optimal it can get.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

09Lexie — Fri, 13 Dec 2013 19:49:23 GMT

@MMB85 wrote:
@Anonymous wrote:
@Anonymous wrote:
Many thanks for your reply. I understand "utilization" better and the need to control what is reported. A higher credit line of say $1,000 on which $400 is spent on a regular basis but paid off in full each month before the due date would have a utilization of 40% and not so much of a "living on the edge" image. It would also demonstrate the capacity to meet a $400 payment obligation on an ongoing basis. Making two payments of $200 each would bring utilization down to 20%. What is considered optimal utilization?
Optimal utilization is slightly above 0%.

One reason for this is that it's important to show "signs of life".

But it's better to have 0% utilization than a high figure like 75%.

The "signs of life" are seen through your daily transactions, not your utilization %. Having a really low util% won't hurt you, but t won't benefit you as compared to a 0%.
Showing heavy and regular use of a card, which also regularly shows a 0% utilization is the most optimal it can get.

Daily transactions are seen only by that creditor. Others viewing your cr are not privy to your detailed transactions unless they have been reported to the CRAs. The figure of 1-9% util across all cc's and with only 1reporting a balance is used for optimal FICO scoring.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

MMB85 — Fri, 13 Dec 2013 20:31:14 GMT

@09Lexie wrote:
@MMB85 wrote:
@Anonymous wrote:
@Anonymous wrote:
Many thanks for your reply. I understand "utilization" better and the need to control what is reported. A higher credit line of say $1,000 on which $400 is spent on a regular basis but paid off in full each month before the due date would have a utilization of 40% and not so much of a "living on the edge" image. It would also demonstrate the capacity to meet a $400 payment obligation on an ongoing basis. Making two payments of $200 each would bring utilization down to 20%. What is considered optimal utilization?
Optimal utilization is slightly above 0%.

One reason for this is that it's important to show "signs of life".

But it's better to have 0% utilization than a high figure like 75%.

The "signs of life" are seen through your daily transactions, not your utilization %. Having a really low util% won't hurt you, but t won't benefit you as compared to a 0%.
Showing heavy and regular use of a card, which also regularly shows a 0% utilization is the most optimal it can get.
Daily transactions are seen only by that creditor. Others viewing your cr are not privy to your detailed transactions unless they have been reported to the CRAs. The figure of 1-9% util across all cc's and with only 1reporting a balance is used for optimal FICO scoring.

Well, I have never carried a balance over. I have always paid in full every few days. I guess it is just my thing, but it seems to be working for my credit scores. I just feel more comfortable paying in full, not carrying a balance and having my Util% report at 0.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

Anonymous — Fri, 13 Dec 2013 20:38:54 GMT

@MMB85 wrote:
@09Lexie wrote:
@MMB85 wrote:
@Anonymous wrote:
@Anonymous wrote:
Many thanks for your reply. I understand "utilization" better and the need to control what is reported. A higher credit line of say $1,000 on which $400 is spent on a regular basis but paid off in full each month before the due date would have a utilization of 40% and not so much of a "living on the edge" image. It would also demonstrate the capacity to meet a $400 payment obligation on an ongoing basis. Making two payments of $200 each would bring utilization down to 20%. What is considered optimal utilization?
Optimal utilization is slightly above 0%.

One reason for this is that it's important to show "signs of life".

But it's better to have 0% utilization than a high figure like 75%.

The "signs of life" are seen through your daily transactions, not your utilization %. Having a really low util% won't hurt you, but t won't benefit you as compared to a 0%.
Showing heavy and regular use of a card, which also regularly shows a 0% utilization is the most optimal it can get.
Daily transactions are seen only by that creditor. Others viewing your cr are not privy to your detailed transactions unless they have been reported to the CRAs. The figure of 1-9% util across all cc's and with only 1reporting a balance is used for optimal FICO scoring.
Well, I have never carried a balance over. I have always paid in full every few days. I guess it is just my thing, but it seems to be working for my credit scores. I just feel more comfortable paying in full, not carrying a balance and having my Util% report at 0.

Well it certainly seems to be working for your scores.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

Anonymous — Fri, 13 Dec 2013 20:40:45 GMT

I keep a monthly table of my EX scores from PSECU.

It looks like around a 9-point decline with 0% utilization, as compared to a utilization like 1%.

The result might be different for someone else.

Not something to worry about a lot unless you're trying to squeeze out a few more points.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

MMB85 — Fri, 13 Dec 2013 20:42:36 GMT

@Anonymous wrote:
@MMB85 wrote:
@09Lexie wrote:
@MMB85 wrote:
@Anonymous wrote:
@Anonymous wrote:
Many thanks for your reply. I understand "utilization" better and the need to control what is reported. A higher credit line of say $1,000 on which $400 is spent on a regular basis but paid off in full each month before the due date would have a utilization of 40% and not so much of a "living on the edge" image. It would also demonstrate the capacity to meet a $400 payment obligation on an ongoing basis. Making two payments of $200 each would bring utilization down to 20%. What is considered optimal utilization?
Optimal utilization is slightly above 0%.

One reason for this is that it's important to show "signs of life".

But it's better to have 0% utilization than a high figure like 75%.

The "signs of life" are seen through your daily transactions, not your utilization %. Having a really low util% won't hurt you, but t won't benefit you as compared to a 0%.
Showing heavy and regular use of a card, which also regularly shows a 0% utilization is the most optimal it can get.
Daily transactions are seen only by that creditor. Others viewing your cr are not privy to your detailed transactions unless they have been reported to the CRAs. The figure of 1-9% util across all cc's and with only 1reporting a balance is used for optimal FICO scoring.
Well, I have never carried a balance over. I have always paid in full every few days. I guess it is just my thing, but it seems to be working for my credit scores. I just feel more comfortable paying in full, not carrying a balance and having my Util% report at 0.
Well it certainly seems to be working for your scores.

Ya. I am not saying that having a low utilization ( <10%) hurts you, I am just saying that having a utilization is not better than having 0% utilization. Of course there are expections. I am talking about heavily used card with 0% utilization vs a heavily used card with <10% utilzation. Of course a heavily used card with <10% utilzation is better than a card with 0% but rarely if ever, gets used.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

Anonymous — Fri, 13 Dec 2013 20:44:06 GMT

@MMB85 wrote:

Well, I have never carried a balance over. I have always paid in full every few days. I guess it is just my thing, but it seems to be working for my credit scores. I just feel more comfortable paying in full, not carrying a balance and having my Util% report at 0.

OK, but earlier you talked about myths and hearsay, and that is really what you are doing (or reporting just on your own experience). The critical thing is the creditors only have detailed transactional information for the cards they issue. So Chase knows what is happening on the Freedom card, but all they can tell about your Citi card is the information reported monthly to the CRAs, and similarly Citi knows all about their card, but very limited info on Freedom.

So the amount reported each month DOES matter, and lots of analysis shows that showing a small balance on exactly one card maximizes FICO. Most other things are less clear, is an issuer more likely to give you a new card with a high CL if they see lots of usage on other cards (maybe I can get some of that usage) or do they prefer to see very little usage (this person doesn't seem to be in trouble, so I can take a chance).

But if you are not trying to optimize score (and most people here over-worry about this) then there is no problem in paying in full on the due date. Doing what you do might work for you, but is missing one of the key advantages of credit cards, you can get an interest-free float between purchase and due date. As you say, you are using your credit card as a debit card, and you may have good reason, but it is not financially advantageous.

Re: I want to pay off billed credit card charges in full each month to improve my credit score.

09Lexie — Fri, 13 Dec 2013 20:42:59 GMT

@MMB85 wrote:
@09Lexie wrote:
@MMB85 wrote:
@Anonymous wrote:
@Anonymous wrote:
Many thanks for your reply. I understand "utilization" better and the need to control what is reported. A higher credit line of say $1,000 on which $400 is spent on a regular basis but paid off in full each month before the due date would have a utilization of 40% and not so much of a "living on the edge" image. It would also demonstrate the capacity to meet a $400 payment obligation on an ongoing basis. Making two payments of $200 each would bring utilization down to 20%. What is considered optimal utilization?
Optimal utilization is slightly above 0%.

One reason for this is that it's important to show "signs of life".

But it's better to have 0% utilization than a high figure like 75%.

The "signs of life" are seen through your daily transactions, not your utilization %. Having a really low util% won't hurt you, but t won't benefit you as compared to a 0%.
Showing heavy and regular use of a card, which also regularly shows a 0% utilization is the most optimal it can get.
Daily transactions are seen only by that creditor. Others viewing your cr are not privy to your detailed transactions unless they have been reported to the CRAs. The figure of 1-9% util across all cc's and with only 1reporting a balance is used for optimal FICO scoring.
Well, I have never carried a balance over. I have always paid in full every few days. I guess it is just my thing, but it seems to be working for my credit scores. I just feel more comfortable paying in full, not carrying a balance and having my Util% report at 0.

I never said carry a balance , rather than have a balance report. Two separate factors that will impact on scoring. If your CR's are constantly showing 0 balances, it appears that you are not using your cc's